Secret Network Warns of AI Exploit Risks in Proposed Arbitrum Integration

“The security risk is the aspect we take most seriously,” the team said, pointing to legacy code and the growing threat of AI-driven exploits.

Privacy-focused layer-1 blockchain Secret Network has proposed migrating from its longtime base on Cosmos to Ethereum layer-2 Arbitrum, citing security concerns related to artificial intelligence, along with several other factors.

Secret Network has operated privacy-preserving smart contracts on the Cosmos ecosystem since 2020, when the network was experiencing strong growth. However, the team said on Tuesday that the landscape has since changed significantly.

“The security risk is the issue we take most seriously,” the team said. “Legacy code is becoming much easier to examine, and AI is lowering the cost of exploiting outdated code across the board.”

The recent Axelar-Secret IBC bridge exploit underscored the increasing security risks posed by aging and poorly maintained code, a threat the team believes is being amplified by AI-assisted attacks. It also noted that advanced AI models, including Anthropic’s Claude Mythos 5, have significantly improved the ability to identify and potentially exploit software vulnerabilities.

Market Liquidity Continues to Decline#

The Secret team described Arbitrum as offering “deep liquidity, tooling, wallet and exchange support, and thousands of builders composing with one another.” It also said liquidity has declined across the Cosmos ecosystem, while many developers have shifted their focus to other blockchain networks.

“The tooling you’d want to count on is shakier than it used to be, and a number of projects that once anchored Cosmos have migrated,” it added.

“Attacks that used to take deep manual effort are getting cheaper as models get better at reading contracts, tracing assumptions, and turning a forgotten edge case into a working exploit.”

The proposal, which still requires approval through a governance vote, comes after a bridge exploit in June that led to the loss of $4.7 million in bridged assets. However, Secret’s native token, SCRT, was not affected by the incident.

The team said SCRT needs a more stable long-term foundation to remain sustainable, adding that it believes the Ethereum ecosystem provides the right environment for the token’s future growth.

The team plans to take a one-time snapshot of SCRT balances on Sept. 1, which will serve as the basis for issuing a new ERC-20 version of the SCRT token on Arbitrum.

Total Value Locked in DeFi Continues to Decline#

The Cosmos ecosystem currently holds around $2 billion in total value locked, marking an 88% decline from its peak during the 2021 bull market. In comparison, Arbitrum leads all layer-2 networks with $17.4 billion in total value secured, according to L2Beat.

According to DefiLlama, Secret Network currently has just $1.3 million in total value locked (TVL) on the Cosmos ecosystem.

SCRT holders responded negatively to the announcement, sending the token down 24% over the past 24 hours to around 4.1 cents. According to CoinGecko, the price now sits more than 99% below its all-time high reached in 2021.

Secret is not the only blockchain network to move away from the Cosmos ecosystem. In February, privacy-focused blockchain NilChain, which was built using the Cosmos SDK, also transitioned to Ethereum.

In June, the Sei Network completed its transition from Cosmos to the Ethereum Virtual Machine (EVM), shutting down its native Cosmos transaction layer and fully adopting an Ethereum-based infrastructure.

In January, stablecoin-focused blockchain Noble announced its decision to migrate from the Cosmos ecosystem to Ethereum, continuing the trend of projects shifting to the Ethereum network.